Stable signs of economic turnaround in the horizon • Officials upbeat on benefits of new investment incentive law

Despite the weak rally of local businesses during the past three years, hope continues to spring eternal for the Northern Marianas economy.

The Commonwealth Development Authority has started receiving inquiries and applications from foreign investors under the recently-enacted Investment Incentive Act of 2000.

The inquiries are consistently coming in although crafting by CDA of the new law’s implementing guidelines are still in the final stages, said House Speaker Benigno R. Fitial in an interview yesterday.

Mr. Fitial said increased number of concrete applications for the establishment of new businesses in the CNMI are anticipated to pour in once the implementing regulations are put in place.

“CDA is doing the final touches. There were just some provisions that needed amendment, to include hotel renovations in the list of activities qualified for tax breaks,” he told reporters.

Mr. Fitial disclosed initial reports from CDA indicate that the Qualifying Tax Certificate is already beginning to reap good fruits from interested Asian and American investors.

The speaker is confident the new incentive program would build stronger economic backbone for the Northern Marianas, which has been largely dependent on tourism and apparel manufacturing activities.

Under Public Law 12-32, CDA would issue a Compliance Certificate to businesses that have qualified for tax rebates or tax abatements in exchange for a new business activity on the islands.

Businesses that are qualified to become a holder of the Compliance Certificate are those engaged in franchise restaurants, water parks, cultural centers, theme parks, resort hotels and condominium, golf courses, electronic commerce, telecommunications, manufacturing and other tourism-related activities.

Minimum capital that should be involved in the new and expanded investments ranges from $500,000 to $10 million, depending on the type of business that will be established.

Representatives from various business organizations in the CNMI, the Department of Commerce and the Governor’s Economic Revitalization Task Force worked closely with the Legislature to come up with the measure.

Government officials and business leaders have joined forces to plot measures that would spur economic activities in the Northern Marianas primarily because of flat growth in terms of new investments, as well as expansions.

While total number of business licenses issued by the CNMI government increased by as much as 100 percent in the first six months of 2000 to 3,882 from the previous year’s average of 1,794 permits, analysts said this does not automatically translate to growth in economic activities.

Commerce officials explained that some establishments in the Northern Marianas hold more than one business license since existing laws require them to secure a permit each for the sale of liquor, cigarette and other consumer products.

In fact, rally of the Northern Marianas economy continues to pale in comparison during the boom years of 1996 and 1997, the same time when the government issued only an average of 1,865 and 2,009 business permit in a six-month period.

Although higher number of business renewals does not translate to economic growth, analysts said the situation indicates stronger business confidence primarily spurred by reports on the slow but sure recovery of the islands’ travel industry.

Analysts said the growth only reveals that the magnitude of ailing businesses have started to drop, indicating a significant reduction in the average number of establishments that are closing down because of economic upheavals.

Government officials said it will take the CNMI longer years to recover from deep economic slump or at least come close to the 1997 level since more than half of all the islands’ existing establishments in 1996 have stopped operations since the Asian financial upheaval fanned towards the Northern Marianas in early 1998.